The reality is that Green Deal providers
foot the bill with the homeowner repaying the debt over time via a charge on
their energy bills. Sounds simple.
The arrangement is essentially a loan and
therefore protection is provided under the Consumer Credit Act. This means the
provider is obliged by law to provide certain information, such as the total
charge for credit, any APR, how repayments are calculated, information about
cancellation rights etc. That’s
the good news.
The bad news is that, like anything bought
on credit, improvement works will cost significantly more than they would if
paid for up front. As to whether
the hem owner will be advised of cheaper alternatives will remain to be seen.
There is a sort of a safeguard through what
is known as a "Golden Rule" – that the cost of repaying the loan
should not exceed the estimated energy savings each period. So, for example, if
it is estimated you will save £50 a quarter on your energy bills, your Green
Deal provider may not recover more than £50 a quarter from you to pay back your
loan. But the key word here is ‘estimate’ what if the actual savings are
less? Does this mean the
provider will refund the difference?
In short the answer is an emphatic no. The risks will be explained but I suspect little
emphasis will be given to the same.
The other downside is that the ‘debt’
follows the property and not the person who took the loan out. This means when the homeowner
sells it will be the buyer who picks up responsibility for the liability. Purchasers may not be able to afford
the repayments, particularly first time buyers.
The scheme seeks to address this concern in
two ways. First, there are extensive rules about disclosure – anyone selling a
property must tell a prospective buyer if there is a Green Deal attached to it;
the buyer must be notified before the seller accepts an offer at the very
latest. Second, the code of practice states that if the occupier of the house
changes, the provider should reassess the affordability of the plan for the new
occupant.
This presents practical problems and could
make a property with a Green Deal attached more difficult and/or more expensive
to sell. The disclosure
requirements are strict, and a buyer must consent to any Green Deal in writing.
A homeowner who fails to obtain
such consent will have to pay compensation. What if a buyer does not want to
consent? There is little the
seller can do beyond negotiating. They could, for example, offer to pay off the
loan in full. In such cases, however, they should be prepared to pay an early
settlement fee, and may well find themselves out of pocket if a buyer does not
agree to any corresponding increase in the purchase price.
Even if a buyer does consent to the Green
Deal, the reassessment requirement may disclose no or little saving given the
buyer's needs and energy usage will inevitably differ. A buyer may therefore
want the reassessment done before deciding whether to make an offer on a
property, all of which is likely to take time. This could cause delay or even the collapse of the
transaction.
The idea is good but when you drill down
and consider the small print as well as the complications that arise on the
sale of the property, one is bound to seriously question the benefit of the
estimated short term saving.
Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidp@mjpconveyancing.com
